Wall Street Journal
Different strokes: As trading revenues shrink and more stringent regulations and higher capital requirements pinch their top and bottom lines, Goldman Sachs and Morgan Stanley "have turned to more basic banking businesses, betting that the cachet of their brand names can overcome relative lack of experience in dealing with the deposits and loans of middle-class Americans."
The two banks are taking different approaches. "Morgan Stanley, which already had made wealth management a key part of its business, is looking to squeeze more revenue from its existing pool of generally well-off clients. Goldman is casting a wider net, hanging out an internet shingle in hopes of attracting deposits from and making loans to Main Street America—opening the door wide to less-wealthy clients it once shunned."
A new Rush: The prepaid RushCard is expected to announce new features Monday, including a mobile phone app that can be opened with a customer's fingerprint. The card, founded by hip-hop producer Russell Simmons, agreed to pay $20 million last May to settle a lawsuit filed by consumers after a glitch prevented them from accessing their accounts. The program, which caters to mostly lower income customers, is now run by Ron Hynes, a former prepaid card executive at MasterCard.
PwC settles: PwC, which was sued for $5.5 billion for providing clean audits for six years to the parent company of Colonial BancGroup before the latter failed due to a mortgage loan scam, settled the case late last week shortly after the trial began. "The case was settled to the mutual satisfaction of the parties," the auditing and consulting firm said, not providing further details. Colonial failed after executives at now defunct Taylor, Bean & Whitaker offered up phony mortgages as collateral for loans. The case was the biggest accounting negligence lawsuit ever to go to trial.
No negative rates--yet: Zrcher Kantonalbank, one of Switzerland's biggest domestic banks, said it won't impose negative interest rates on non-business retail customers but hasn't ruled out doing so in the future if the Swiss National Bank continues to push rates further below zero. The commercial bank's CEO said negative rates are "distorting the financial system."
Holding the bag: Chinese banks are likely to be shouldering most of the losses as the country's steel and coal companies try to restructure their debt in government-mandated rescues, including better loan terms and debt swaps. "With the finances of local governments being weak, the China Banking Regulatory Commission has been ordering Chinese banks to 'rescue' these companies, and we believe that banks are likely to suffer from the government's plans," said one debt analyst. Chinese banks already have a lot of bad loans on their books, reportedly accounting for 19% of their total commercial loans.
Acquisitive banker: The paper profiles Richard M. Adams Sr., chairman and CEO of United Bankshares, which recently announced its intention to buy Cardinal Bank for $912 million, making it the 32nd-largest bank in the U.S. and one of the biggest community banks in the Washington, D.C., area. "It's all about people and paper," Adams says about his acquisitions strategy. "The bottom line is, if you are in a merger-and-acquisitions strategy and there are target markets where you want to be, find out who is involved in those banks and build relationships with them. That is the human aspect. The other thing is paper. When you make acquisitions, they take stock in your company. So the quality of your stock is very important." The bank offers that: It has raised its dividend 42 successive years and currently pays $1.32 annually, a yield of 3.4%. This profile follows one of Adams American Banker did last week.